Vladimir Putin sat motionless as the minister, seizing on the Russian leader’s first major meeting with his economic team in months, itemized the challenges.

A recession is imminent, inflation is getting out of hand and the ruble and oil are in freefall, Economy Minister Alexei Ulyukayev told Putin, according to people who attended the meeting at the presidential mansion near Moscow in mid-October. Clearly, Ulyukayev concluded, sanctions need to be lifted.

At that, Putin recoiled. Do you, Alexei Valentinovich, he asked, using a patronymic, know how to do that? No, Vladimir Vladimirovich, Ulyukayev was said to reply, we were hoping you did. Putin said he didn’t know either and demanded options for surviving a decade of even more onerous sanctions, leaving the group deflated, the people said.

Days later, they presented Putin with two variants. To their surprise, he chose an initiative dubbed “economic liberalization,” aimed at easing the financial burden of corruption on all enterprises in the country, the people said. It was something they had championed for several years without gaining traction.

The policy, which Putin plans to announce during his annual address to parliament next month, calls for a crackdown on inspections and other forms of bureaucratic bullying that cost businesses tens of billions of dollars a year in bribes and kickbacks, the people said. It entails an order from the president to end predatory behavior, with prosecution being the incentive for compliance, they said.

Thieves Beware

“Wastefulness, an inability to manage state funds and even outright bribery, theft, won’t go unnoticed,” Putin said at a meeting with supporters in Moscow yesterday.

Russia’s growing isolation over its support for the separatist rebellion in Ukraine has created a divide among competing factions within Putin’s inner circle. One group, the “siloviki,” is dominated by men who share Putin’s background in the security services and reject U.S. hegemony. They’ve held the upper hand over another bloc, centered around Prime Minister Dmitry Medvedev, that favors less state control over the economy, according to five officials close to the president.

Putin’s spokesman, Dmitry Peskov, said he wasn’t aware of any specific “liberalization plan” and declined to comment on what the president plans to say in his address to parliament.

“We are constantly and purposefully cutting the bureaucratic burden on businesses,” Peskov said by phone. Ulyukayev declined to comment through his press service.

Putin’s Choice

Putin’s backing of the program marks a revival of sorts for the Medvedev faction, which advocates closer integration with the U.S. and Europe, a process now derailed by sanctions, as the path most beneficial to the country. This group, which includes Ulyukayev, had been sidelined since February, when the overthrow of Ukrainian President Viktor Yanukovych, Russia’s ally, spurred the siloviki to organize the annexation of Crimea.

Putin chose the corruption crackdown policy over the other option presented by his economic team: the “mega-projects” program. That path would further enrich two of his closest allies, billionaires Gennady Timchenko and Arkady Rotenberg, by transfering huge sums of money to contractors.

With sanctions hurting more than anticipated, declaring a war on corruption is an “obvious” course of action, but it’s bound to fail, said Boris Makarenko, deputy director of the Center for Political Technologies in Moscow.

‘New Reality’

“Such measures are alien to the mentality of the government bureaucracy, whose natural instinct is to go for more of the same, more regulation, more squeezing revenues from businesses,” Makarenko said.

It was only in September and October that officials and executives fully realized that sanctions will be in place for a long time and that urgent measures are needed to limit the damage, according to Sergey Dubinin, the former central bank governor who is now chairman of state-run VTB Group, Russia’s second-largest bank.

“They were hoping the sanctions were temporary,” Dubinin said in an interview in the Russian capital. “Now they’ve woken up to the new reality.”

The call to action was triggered by the “shocking devaluation” of the ruble, which unfolded as the closure of foreign financial markets coincided with falling prices for oil, the country’s largest export, Dubinin said. That has sparked a cash crunch for companies that have $44 billion of debt due by year’s end, according to central bank estimates.

Oil Burden

Putin said last week Russia is prepared to withstand a “catastrophic” slump in oil prices. Brent, a benchmark for more than half of the world’s crude, has plunged 30 percent since the end of June. The ruble has declined the same amount against the dollar this year, the most of 24 emerging-market currencies tracked by Bloomberg.

Before the first round of sanctions were imposed in March, the government did a good job of creating a “favorable external environment” for Russian companies, even though corruption and other internal pressures remained burdensome, said Sergei Vasilyev, deputy head of state development bank VEB.

“Now the external environment has become very difficult, so we need to liberalize the internal environment to create better conditions for economic agents,” Vasilyev said. “Liberalization can help offset adverse external conditions without increasing the tax burden.”

Official Swindlers

Former Finance Minister Alexei Kudrin, who sits on the president’s Economic Council, said a successful campaign against extortion would be akin to cutting taxes without further weakening public finances. Corruption is one of the greatest obstacles to growth and if Putin pushes the policy with the same vigor he pursues security issues, the impact on the economy may be profound, Kudrin said in an interview.

“The key driver for the development of the country is citizens’ confidence in the economy,” Kudrin said. “The first thing to do is to limit the number of control and supervisory functions of the state. Authorities simply have to stop going to enterprises to swindle money. We have to limit fire, sanitary and technical inspections.”

In 2008, when Putin swapped jobs with Medvedev for four years, businesses were paying more than $200 billion a year in bribes, Moscow-based research group Indem said in a report that year, using data from prosecutors. Most Russians say corruption has only gotten worse since, according to a survey published by Transparency International.

‘Economic Freedom’

Business Solidarity, a Moscow-based organization that campaigns against corruption, estimates that bribes, kickbacks and related illegal activities end up increasing the retail price of most goods by 30 percent.

A crackdown on inspections, if done right, could have an “immediate impact” on the economy, said MDM Bank Chairman Oleg Vyugin, who served as first deputy head of the central bank from 2002 to 2004. As it is now, law-enforcement agencies have a simple business model: the more they inspect, the more they earn, Vyugin said in an interview.

“The economic powers of the Investigative Committee, the Prosecutor General’s Office and the police must be curbed,” Vyugin said. “This is the only way to convince people that it’s possible to develop a business here.”

There’s an irony about the U.S. and European sanctions that isn’t lost on the members of Putin’s economic team. While the penalties have pushed foreign investors away, they’ve also become the catalyst for meeting one of their key demands -- rooting out corruption.

One of the major debates about the new program now is what to call it because Putin thinks “Economic Liberalization” sounds too western, according to one of the people who attended last month’s policy meeting. The frontrunner is “Economic Freedom” and everyone is praying he doesn’t change his mind, the person said.

I had to check the date of the OP on this thread. 'Cause we've heard this all before and many times. Color me skeptical.

ConanS

19-11-2014, 18:25

I'll believe it when I see it

bydand

19-11-2014, 20:18

Gravy sucking pigs. When will they stop? I too will believe it when I see it; or is it, see it when I believe it...

Russian Lad

20-11-2014, 09:11

There is a Russian saying - ворон ворону глаз не выклюет. A crow will never eat out another crow's eye. It is all cheap entertainment for the gullible hoi-polloi (there are still some left, those who survived the ruthless lines for buckwheat and the staggering fall of the ruble). Also, it may be used as a pretext to open more cases against the wobbling liberal opposition, on some economic charges.
By the way, I have noticed that he very often does the opposite from what he says. Another observation - he very often does what he claims his perceived enemies are doing.
In this respect his recent claim "Russia will never surrender to the US!" gave me some hope for a relatively peaceful decay. It may be short-lived, but let's see.
Meanwhile, massive layoffs and a significant increase of living on the backdrop of devalued salaries are around the corner as we speak... I would not be surprised if he declares NEP (new economic policy), like one of our dictators (Lenin) did in the past. Doubt he can come up with something really new, it is the old school.

By the way, where are all those "patriotic" girls like Penka, why are they silent? Hope it is pure shame for having been so naive, at this point. Or they are busy in buckwheat lines perhaps, hoping to snatch the rationed 5 kilos? Hohoho. Come on, girls, better late than never, admit you were wrong. Otherwise I will not have erection if we ever meet IRL and you will feel like "downclass subbies", using Jas's terminology.:rasta:

Russian Lad

20-11-2014, 10:00

Was there such a dire need to merge those two posts, Andy? My two thanks disappeared this way. You have nothing better to do in the morning than messing with my posts and Thank yous?:) :cold::coffee:

Judge

20-11-2014, 10:04

Was there such a dire need to merge those two posts, Andy? My two thanks disappeared this way. You have nothing better to do in the morning than messing with my posts and Thank yous?:) :cold::coffee:

So that's how your post grew a new paragraph, I thought you had some new editing skills...
I'll thank you twice....

Russian Lad

20-11-2014, 10:17

See, he is up to all sorts of tricks in his USSR proclivities, even you are left clueless and wondering on occasion... Now he has elaborated a sneaky way to kill my Thank yous. What is next? My physical incarceration and tortures till I confess under which bench I hide the microfilms? :emote_popcorn:

Judge

20-11-2014, 10:50

I confess under which bench I hide the microfilms? :emote_popcorn:

You could be more imaginative and use a rock.:10293:

bydand

30-11-2014, 15:19

Putin Said to Stun Advisers by Backing Corruption Crackdown

By Evgenia Pismennaya and Irina Reznik 2014-11-19T10:56:11Z

Vladimir Putin sat motionless as the minister, seizing on the Russian leader’s first major meeting with his economic team in months, itemized the challenges.

It is no wonder they were stunned...

How He and His Cronies Stole Russia
Anne Applebaum DECEMBER 18, 2014 ISSUE

That corruption was part of the Russian system from the beginning is something we’ve long known for a long time, of course. In her book Sale of the Century (2000), Chrystia Freeland memorably describes the moment when she realized that the confusing regulations and contradictory laws that hog-tied Russian business in the 1990s were not a temporary problem that would soon be cleaned up by some competent administrator. On the contrary, they existed for a purpose: the Russian elite wanted everybody to operate in violation of one law or another, because that meant that everybody was liable at any time to arrest. The contradictory regulations were not a mistake, they were a form of control.

DECEMBER 18, 2014 - the desperate wife of Radek Sikorsky even has invented a Time Machine ;) . Doesn't help much though.

JanC

30-11-2014, 16:41

It says "issue" after the date so it will be included in the print issue which will come out on that day.

Normal procedure these days for articles to appear online before the printed issue.

You don't need much research to see how the country has been robbed blind, it's all old buddies and colleagues of who have become billionaire businessmen regardless of qualifications. The regular population gets the scraps.

FatAndy

30-11-2014, 16:47

You don't need much research to see how the country has been robbed blind, it's all old buddies and colleagues of who have become billionaire businessmen regardless of qualifications. The regular population gets the scraps.
:agree:

Carl

30-11-2014, 17:48

I had to check the date of the OP on this thread. 'Cause we've heard this all before and many times. Color me skeptical.

This old and tired line gets pulled out and dusted off every time there's trouble on the horizon... seen it countless times.

Carl

30-11-2014, 17:52

You don't need much research to see how the country has been robbed blind, it's all old buddies and colleagues of who have become billionaire businessmen regardless of qualifications. The regular population gets the scraps.

..and that suits Andy just fine.. as he would say, "yes, it is right and correct'..or some other hogwash to that effect.

FatAndy

30-11-2014, 18:13

..and that suits Andy just fine.. as he would say, "yes, it is right and correct'.
Thank you, captain... :)

Fantastika

01-12-2014, 05:56

Whatever corruption in Russia is *dwarfed* by the $trillions of "stimulus" money in the US. What is it, $278,000 in tax money per new job created? or is it $4 .1 Million? No other country can hold a candle to US government waste, fraud and abuse.

Yaks

01-12-2014, 06:25

lol

Delta268

01-12-2014, 11:14

Putin just introduced a bill to the duma LOWERING penalties for corruption!!!

FatAndy

01-12-2014, 11:22

Putin just introduced a bill to the duma LOWERING penalties for corruption!!!
Correct, if you can't prevent/stop a bardak, better to head and legalise it. ;)

JanC

01-12-2014, 11:37

Correct, if you can't prevent/stop a bardak, better to head and legalise it. ;)

Talk about bending over backwards to defend the indefensible...

FatAndy

01-12-2014, 11:48

Talk about bending over backwards to defend the indefensible...
Defend? Indefensible? :)

It is just ascertaining of the fact.

JanC

01-12-2014, 12:03

Well you said it was "better" didn't you? In what way is it better?

If the existing rules were not doing anything against corruption, why would anyone lift a finger to lower the consequences of getting caught? It can only serve corruption itself which is a negative no matter how I look at it. It cannot possibly be better.

FatAndy

01-12-2014, 12:07

In what way is it better?
Spending less energy to take more control.

JanC

01-12-2014, 12:15

Spending less energy to take more control.

I don't see how these things are related. How much energy is being spent right now on enforcing anti-corruption laws? Changing the penalties does not change how vigorously any corruption is being investigated. It only changes the punishment when someone is caught. And take more control? They already have absolute control over everything, judiciary included.

Corruption is one of, if not the biggest, problem in this country. It's stifling economic growth, a huge brake on the economy. As the Ruble is passing 52.5 to the USD currently, with oil still dropping and Russia's budget issues getting bigger by the minute, lowering the consequences of corruption is the complete opposite of what they should be doing. Russia needs a "normal" business climate, living off stuff that comes out of the ground clearly isn't a viable or stable long term strategy.

It's indefensible. I don't understand how regular Russians like your good self are OK with being ripped off on a daily basis by people who evidently don't give 2 sh!ts about you or the country. The billionaire buddies aren't going to give any money back when times are hard, the cuts will fall onto those who already have very little.